World markets rallied strongly over the quarter as key central banks committed to provide additional stimulus in an effort to further support the economic recovery and asset markets. In US dollar terms the MSCI World index closed the quarter up 13.9%. Emerging markets in general outperformed its developed peers with the MSCI Emerging Market index closing the quarter up 18.2%.

Our local bourse ended the quarter up 24.9% in dollar terms buoyed by our currency which strengthened further over the quarter. The rand ended the quarter at 6.96 to the US dollar, 9.7% stronger than its June 2010 closing level.

In rand terms, the FTSE/JSE All Share index ended up 13.3% with all sectors delivering solid returns over the quarter. Locally industrials and financials were the top performing sectors with a more favorable interest outlook and corporate action news flow (proposed buyout of Massmart by Wal-Mart Stores Inc and the takeout of Dimension Data by Nippon Telegraph and Telephone) providing a strong underpin to performance over the quarter.

Resources generally lagged the market given the negative impact of the currency although stronger commodity prices provided some support. Within resources, the precious metal sectors underperformed (Platinum index down 2.3%, Gold index down 1.0%) while the diversified miners, paper companies and industrial metal sectors outperformed. The FTSE/JSE Industrial index ended the quarter up 18.5% while the FTSE/JSE Financials index delivered a return of 15.2%. The FTSE/JSE Resources index ended the quarter up 7.1%.

The Kagiso Top 40 Tracker Fund continued to closely track its benchmark, the FTSE/JSE Top 40 index which delivered a return of 13.4% over the quarter. Significant index changes over the quarter saw the fund trading frequently and marginally detracted from overall performance.

Portfolio manager
Aslam Dalvi

The JSE code for the fund changed from CNAT to KATF on 01/10/2010

Increased concerns around European sovereign debt saw developed markets underperforming over the quarter with the MSCI World index ending the period down 12.5% (in dollar terms). US and UK markets ended the quarter lower with the Dow Jones Industrial index closing down 9.4% and the FTSE 100 closing down 13.8%. Emerging markets performed marginally better over the quarter with the MSCI Emerging Market index closing down 8.3%.

On the resources front, base metals and platinum group metals were generally weaker with zinc (down 26.7%), nickel (down 22.1%) and copper (down 17.0%) among the worst performers over the quarter. The gold price (up 11.6%) rallied strongly as investors adopted a more cautious stance in light of the prevailing debt concerns. The currency depreciated over the quarter with the rand 5.2% weaker than its previous quarters closing level of R7.25 to the dollar. The local bourse followed international markets lower with the Allshare index closing the quarter down 8.2%. Resources were the worst performing stocks over the quarter with the FTSE/JSE Resources index closing down 11.9%. Financials and industrials also ended the quarter down with the FTSE/JSE Industrial and FTSE/JSE Financial index closing down 4.5% and 7.8% respectively.

Over the quarter the Kagiso Top 40 Tracker Fund performed in line with its benchmark, the FTSE/JSE Top 40 index which declined by 9.4%. All index changes that occurred during the quarter were timeously acted upon so as to minimise the relative risk in the fund.


Portfolio manager
Aslam Dalvi

Despite a difficult start to the year, world markets ended the quarter in positive territory with the MSCI World index closing the quarter up 3.4% in dollar terms. Continued signs of a sustained global economic recovery and improving sentiment saw world markets rally strongly during the latter part of the quarter (The MSCI World index was up 6.2% in March).

Developed markets showed a mixed performance in dollar terms over the quarter with the US and Japanese markets positive (S&P 500 up 5.4%, Nikkei 225 up 4.8%), whilst European and Asian markets were generally weaker (FTSE 100 down 0.4%, CAC 40 down 4.8%, DAX down 2.6% and Hang Sang down 2.8%). Emerging markets were strong in dollar terms (MSCI Emerging Markets index up 2.5%) with the exception of China (MSCI China down 1.6%).

Commodity prices in general had a good quarter with platinum (up 11.9%) and palladium (up 21.9%) having a strong quarter. Gold ended the quarter marginally higher while the spot price of Brent crude oil closed up 5.2%. Amongst base metals, lead (down 11.5%) and zinc (8.2%) were weaker. On the currency front, the Rand ended the quarter at 7.29 to the dollar, 1.5% stronger than its previous quarter's closing level.

In line with global markets, the local bourse had a strong first quarter with the FTSE/JSE All Share index returning 4.5% in local currency terms. The financial sector and cyclical sectors in general were the top performers over the quarter. The FTSE/JSE Financials index closed the quarter up 9.9%, outperforming both the Resources index (up 2.1%) and Industrial index (up 4.4%) sectors.

The fund continues to closely track its benchmark, the FTSE/JSE Top 40 index, which ended the quarter up 3.8%.

All index changes that occurred during the quarter were timeously acted upon so as to minimise the relative risk in the fund.

Portfolio manager
Aslam Dalvi

Despite a difficult start to the year, world markets ended the year in positive territory with the MSCI World index closing the calendar year up 1.8% in dollar terms. Positive earnings surprises by companies, early signs of a sustained global economic recovery and improving sentiment saw world markets rally strongly in the second half of the year (the MSCI World index was up 22.5% in the second half of 2009).

While momentum slowed during the final quarter of the year, markets continued to post positive returns with developed markets in general having a strong final quarter. For the quarter (Q409), the S&P 500 and FTSE 100 posted a dollar return of 6.0% and 7.2% respectively.

Emerging markets continued to outperform developed markets with the MSCI Emerging Markets index closing the quarter up 8.6%. Within the emerging market universe, MSCI Chile and MSCI Israel were the top performing markets, delivering a return of 15.4% and 14.1% respectively.

Commodities were generally stronger over the quarter. Amongst base metals, zinc (up 34.0%) and copper (up 19.7%) performed strongly. On the precious metals side, rhodium (up 51.0%), palladium (up 33.7%) gold (up 8.9%) and platinum (up 13.2%) had notable moves over the quarter. The oil price ended the final quarter of the year at 79.4 dollars per barrel, 12.4% stronger than the previous quarter's closing level. The currency remained strong over the quarter, strengthening by 1.5% and closing at R7.4 to the dollar.

In line with global markets, the local bourse had a strong final quarter with the FTSE/JSE All Share index returning 11.4% in local currency terms. Resources were once again the top performing sector, supported by rising commodity prices and an improving global economic outlook. The FTSE/JSE Resources index closed the quarter up 16.7% outperforming both the financial (up 6.5%) and industrial (up 8.5%) sectors.

On a stock basis, Northam Platinum (up 46%), Anglo American Plc (up 34%) and Netcare (up 33%) were the top performers over the quarter. Construction stocks were amongst the worst performers over the quarter with Murray & Roberts (down 20%), Wilson Bayly (down 13%) and Group 5 (down 12%) all underperforming.

The fund continues to closely track its benchmark, the FTSE/JSE Top 40 index, which ended the quarter up 12.5%. All index changes that occurred during the quarter were timeously acted upon so as to minimise the relative risk in the fund.

Portfolio manager
Aslam Dalvi